- USD/JPY rose for the fourth day in a row and soared to a new 24-year high on Wednesday.
- Statements by Federal Reserve Chairman Jerome Powell with a hawkish tone buoyed the dollar and continued to support the move.
- The decline in US bond yields could be the only factor limiting the pair’s rise.
The pair USD/JPY continued a multi-day uptrend and gained traction for the fourth day in a row on Wednesday. Buying interest accelerated during the early American session and propelled the pair to a fresh 24-year high, with the bulls now aiming to conquer the 137.00 round level.
The US dollar received fresh offers and soared to a one-week high after Fed Chairman Jerome Powell reaffirmed bets on more aggressive US central bank policy tightening. Speaking to him at the ECB Forum in Sintra, Powell said the US economy is in good shape and well positioned to handle tighter policy. Furthermore, he added that the Fed remains focused on controlling inflation and market prices are pretty close to the dotted chart.
This helped offset the downward revision to US Q1 GDP, which showed the economy shrinking 1.6% versus a 1.5% drop previously estimated, and provided a nice boost to the dollar. Furthermore, Powell’s hawkish comments validated a wide divergence in the policy stance taken by the Fed and the Bank of Japan. This, in turn, weighed on the Japanese Yen and further contributed to the strong offer tone surrounding the USD/JPY pair.
That said, the drop in US Treasury yields has led to a narrowing of the gap between the US and Japanese rate spread. On the other hand, concerns about a possible global recession could offer some support to the safe-haven JPY and prevent traders from making further bullish bets on the USD/JPY pair, at least for now.
However, the bias seems to remain firmly in favor of bullish traders and any significant pullback could still be seen as a buying opportunity. Even from a technical point of view, breaking past previous highs from last year could set the stage for an extension of the USD/JPY pair’s bull run towards the 138.00 round figure.
Technical levels
Source: Fx Street
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